Finance ministers and central bankers face a tough task coordinating action to spur global growth at G20 meetings this week, with major economies running at different speeds and monetary policies diverging.
Concern over the ability of the US to sustain the global economy as most of the world slows are set to be high on the agenda as the G20 leading economies holds talks in Istanbul yesterday and today.
The meetings come as Greece casts a new shadow over Europe, cheap oil plays havoc with inflation and growth forecasts and a strengthening US dollar threaten emerging economies.
“There is a lot at stake,” IMF managing director Christine Lagarde said in a blog post on Friday. “Without action, we could see the global economic supertanker continuing to be stuck in the shallow waters of sub-par growth and meagre job creation.”
Turkish Deputy Prime Minister Ali Babacan told an Institute of International Finance (IIF) meeting on Sunday that tackling sluggish global growth and giving low-income nations more voice would be among the priorities for Turkey’s G20 presidency.
The former will be easier said than done.
US Secretary of the Treasury Jack Lew said last week the US could not be “the sole engine of growth” and a senior US official said Washington’s message going into the meetings would again be that Europe is not doing enough.
World financial leaders agreed last year to launch new measures to raise their collective GDP growth over the next five years and create millions of new jobs.
The pledge, called the Brisbane Action Plan, entails about 1,000 commitments. European officials said leaders in Istanbul were likely to agree to focus down to just 5 to 10 priorities per nation to make them easier to monitor.
“Kick-starting global growth will be front and center” at the G20 meetings, Canadian Minister of Finance Joe Oliver said last week, citing the stalled eurozone, slowdowns in China and India and geopolitical crises in Ukraine, Iraq and Syria as key risks.
“Though America is carrying the world economy at the moment, that is simply not sustainable,” he added.
Germany is likely to argue that its rising domestic demand and plans to increase public spending show Europe’s largest economy is doing what it can, according to European sources familiar with the G20 agenda.
Babacan said pushing G20 members to meet previous reform commitments would be key, a strategy he has dubbed “keep your word, or explain.”
“It has a lot to do with leadership ... Doing the necessary but difficult things,” he said.
Coming good on pledges made at November last year’s G20 summit in Brisbane could add more than US$2 trillion to the global economy and create millions of new jobs over the next four years, Lagarde said in her blog post.
UBS Group AG chairman Axel Weber said enabling the private sector to help close the financing gap for an estimated US$60 trillion to US$70 trillion in infrastructure spending needed by 2030 would fuel growth.
Higher capital requirements are limiting banks’ ability to invest and regulators should “revisit whether they got that calibration right,” the former Bundesbank president told the IIF meeting.
“My key message to policymakers would be very easy; don’t work against the private sector, work with it,” he said.
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